By Greg Roumeliotis and Michael Flaherty

April 19 (Reuters) - Activist hedge fund Sarissa Capital Management LP said on Wednesday that U.S. respiratory drug company Innoviva Inc reneged on a proxy settlement deal that was struck earlier in the day.

Sarissa, run by former Carl Icahn protege Alex Denner, said in a statement that Innoviva had accepted an offer to settle the proxy contest ahead of the shareholder vote scheduled for Thursday by adding two Sarissa-nominated directors to the board.

After Sarissa signed and sent back the settlement contract Wednesday afternoon, Innoviva continued to lobby shareholders to vote for its own nominees without disclosing its settlement with the activist, the hedge fund said. Then Innoviva said it would no longer agree to a deal.

Innoviva declined to comment.

Based on shareholder votes that had come in as of late Wednesday, Innoviva believed it had enough support to defeat Sarissa's director nominees, according to people familiar with the matter who asked not to be identified discussing internal deliberations.

Innoviva and Sarissa declined to comment on the current votes.

Sarissa, which owns a 2.72 percent stake in Innoviva, had accused the company of spending too much money on executive pay and board compensation, given that its only function is to manage the drug royalties it receives from GlaxoSmithKline Plc .

Earlier this month, Innoviva announced plans to undertake a review of cost and executive compensation structures that it said could result in "meaningful savings in our core operating costs that will benefit our financial performance."

Innoviva, which had 14 employees as of Dec. 31, according to its annual report, has a market capitalization of $1.5 billion. GlaxoSmithKline, which has a 29.3 percent stake in Innoviva, had opposed Sarissa's board nominees.

Innoviva and GlaxoSmithKline submitted an application in November to market their new three-in-one inhaled lung drug for U.S. approval. Innoviva and GlaxoSmithKline have other respiratory medicines in the market.

Sarissa has a track record of shaking up boards in the pharmaceutical industry. Its past targets have included Biogen Inc and Ariad Pharmaceuticals Inc, a manufacturer of cancer drugs which agreed to sell itself to Japanese drugmaker Takeda Pharmaceutical Co. Ltd in January for $5.2 billion. (Reporting by Greg Roumeliotis and Michael Flaherty in New York; Editing by Leslie Adler)